Thu, 17 May 2012 08:51:35 GMT | By TH Chowdary, The Hindu Business Line

End of an era of cheap telephony?

The latest TRAI recommendation prices spectrum at levels that can cripple expansion of rural telephony services.

End of an era of cheap telephony?

In 1994, when for the first time a National Telecom Policy, (NTP) was announced, telephone density in India was 1 phone per 100 people and a year's telephone service would cost Rs. 10,000, exactly the same amount as the annual per capita income (PCI).

Today, with over 950 million telephones, the teledensity is nearly 80 phones per 100 people. At a peak of our expansion, we were giving 15 million telephones per month. The average spend on telephone service for a year today is less than 4 per cent of the annual per capita income.

Landless, daily wage labourers under the NREGA scheme, spending a day's wages, are able to get a month's prepaid telephone service. While in urban areas telephone density ranges from 85-125 per cent, in the rural areas it is about 40 per cent. These achievements became possible because of the new technology --- cellular radio telephony and repeated re-use of the radio spectrum and its allotment to every caller. While technology brought down costs, enlightened policies promoting competition and private sector investment brought down prices.

Modern telephony depends upon intense utilisation of broad radio spectrum. Wise policies have made our defence forces give up huge swathes of radio spectrum for civilian use. The pricing and allocation of radio spectrum and the number of companies that can be allowed to competitively operate in a given area, would determine the costs and outreach of the telecom sector.

Cell phone prices have fallen from Rs 15,000 to Rs 8,000, while providing a wide range of services, such as access to the internet, digital camera, telephone directory, e-mail, and video telephony.

But India's telecom success story is not without negatives. Successive communications ministers from 2004 onwards have indulged in great malpractices in the allocation of spectrum as well as in issuing licences.

As long as licensing remains in the hands of ministers, scandals are bound to occur. Parliament members, vigilant officers and constitutional bodies like the Comptroller and Auditor General of India and the Public Accounts Committee would have to unearth the rip -offs.

The most perplexing part of it all is the Communications Minister's assertion that there is no loss to the public exchequer due to arbitrary allotment of licences and valuation of spectrum (when it was given by a minister of a partner party). Even the Prime Minister once said that there was no loss to the exchequer, and yet we have a minister, secretaries, and an MP in Tihar jail.

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